Randgold rises but FTSE dips as EU euphoria wears off

Randgold Resources has become something of a reverse indicator for the rest of the market recently. When the FTSE falls, Randgold rises, and vice versa. Yesterday was no exception.

As the initial euphoria over the €750bn European aid package wore off, and the uncertainty over the next UK government continued to unsettle investors, leading shares lost much of yesterday's 5% gains. The FTSE 100 finished 53.21 points lower at 5334.21, a near 1% decline, although it was off its worst levels following a slight rally on Wall Street and late suggestions that a Liberal Democrat/Conservative agreement was getting closer. This also gave a late lift to sterling, which climbed around 1% to $1.50 at one point.

Back with Randgold, the company - which has gold mines in West and Central Africa - shone out with a 290p increase to £58.70. The rise was prompted by investors once more seeking out safe havens, and pushing gold to a five month high. But other metal prices fell back, partly on the renewed concerns about sovereign debt and the spread of the Greek financial problems to the rest of the euro zone. But there were also fears that China could soon raise interest rates to dampen down demand - which would hit commodity companies - following higher than expected inflation figures and a near 13% rise in house prices in April.

So Kazakhmys closed 55p lower at £12.70, and Vedanta Resources fell 100p to £24.51. Xstrata lost 42p to £10.50 despite hopes that 35% shareholder Glencore might be considering a merger, having just signed a new credit facility worth $10bn.

Banks were also weaker on worries about their exposure to European debt. Royal Bank of Scotland slipped 1.75p to 50p, Barclays dipped 4.2p to 325.4p and Lloyds Banking Group lost 0.7p to 60.3p.

Tui Travel fell 9.8p to 248.9p as it revealed the disruption caused by volcanic ash had cost the tour operator £90m so far, while Easyjet - which put the figure for its volcano costs at between £50m and £75m - dropped 18.7p to 423.5p.

Intercontinental Hotels lost 4p to £11.02 despite beating expectations with a 15% rise in first quarter profits. Nigel Parson at Evolution Securities said:

We think that International Hotels Group's share price has travelled too far, too fast. The first tentative signs of recovery are now evident but it is likely to remain weak and we prefer cheaper alternatives elsewhere.

But there were some bright spots. National Grid added 4.5p to 612.5p after an upgrade from UBS. The bank said:

National Grid reports its 2010 results on 20 May. We forecast profit before tax to come in at £1,97bn (up 11% year on year), earnings per share at 57.3p a share (up 12%), and dividend per share at 38.5p (up 8%). We expect robust numbers driven by the UK regulated business and lower interest costs. Strong cash flow generation should reassure debt concerns which should bode well for the stock. The company has already pre-funded a substantial amount of 2010/11 funding requirement.

Overall a defensive infrastructure play (95% regulated) with high yield at an attractive valuation. We upgrade National Grid to buy from neutral maintaining a 655p price target.

G4S edged up another 1p to 265.2p following yesterday's suggestions of possible private equity interest for the security group.

BT rose 2.6p to 118.9p ahead of an investor day and its full year results on Thursday. Citigroup issued a buy note, saying:

We expect BT to use the investor day to move away from the "IT services" moniker erroneously applied to Global Services, and emphasise its commitment to entertainment as part of a reinvigorated triple play offering. Only in the last 18 months has BT started to align its cost base with its lower retail market share. We see room for more cost cuts, with the labour pool taking somewhat less of the strain.

Elsewhere Enterprise Inns, the debt laden pubs groups, announced it had successfully signed a new £625m borrowing facility, prompting a 17.2p rise in its share price to 139.3p. But analysts pointed out that the company's total net debt still stood at £3.4bn, and on the trading front its half year profits fell from £104m to £86m.

But spread betting firm IG lost 7.8p to 392.2p as private equity group CVC Capital - which backed a management buyout of the business in 2003 - sold around half its 8.2% stake for £58m. Barclays Capital placed 15.1m shares on behalf of CVC at 386p each.